Self-Fulfilling Prophecies and the Health Insurance Exchanges

Two weeks after the health insurance exchanges were set to launch, the uninsured in most states aren’t getting much help. Opponents of the Affordable Care Act argue that the entire project was unworkable from the beginning. But the launch has not failed everywhere. In fact, the more closely the implementation resembles the legislation as enacted, the more smoothly it seems to run.

The Original Plan

The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), as amended by the Health Care and Education Reconciliation Act (HCERA) (P.L. 111-152) (together, the ACA), was supposed to establish a seamless enrollment system where the uninsured could make one application to enroll in any affordable health plan for which they were eligible. The states had two major roles to play: expanding Medicaid and establishing the health insurance exchanges.

As amended by HCERA, section 1311 of PPACA provided that the states shall establish the health insurance exchanges. The law gave states flexibility to decide how to do it; they could establish regional exchanges, cooperating with other states. They could consolidate the small business and individual markets in one exchange. The federal government would provide money and technical assistance, but it was assumed that states would want to retain control over the marketplace because of their regulation of insurance. The law provided for the federal government to step in if a state was not prepared to run its exchange.

The Supreme Court Decision

The expansion of Medicaid to cover all adults with incomes at or below 138 percent of the federal poverty level (FPL) (133 percent plus a 5 percent disregard) was essential to the legislative scheme. The Supreme Court’s ruling in National Federation of Independent Businesses v Sebelius, i.e., that states could not be “coerced” into expanding Medicaid via the threat of withdrawal of all Medicaid funds, removed one leg from the three-legged stool on which the legislation rested. And it was a surprise to many observers. The Medicaid expansion was considered the least likely element of PPACA to be struck down. CMS and its predecessors have disallowed matching funds for particular expenditures and denied approval of proposed state plan amendments, but never has it withdrawn all funding from a state’s Medicaid program in order to enforce Medicaid requirements.

Continued Resistance

But the vehement opposition to PPACA resulted in attacks on several fronts simultaneously. Both private business entities and nearly half the states filed or joined in lawsuits challenging the constitutionality of PPACA. And many of the same states passed legislation to remove themselves from the application of the individual mandate provisions or to bar the state from expanding Medicaid or establishing a health insurance exchange. Governors and legislatures refused to participate in implementing either the exchanges or the Medicaid expansion, even after accepting grant money to begin the work to establish the exchange. By shifting the responsibility for the exchange and simplified enrollment to the federal government, they helped to maximize the likelihood of failure. It’s interesting that Texas Governor Rick Perry, who has resisted PPACA at every possible turn, announced that the state is closing its high-risk insurance pool on January 1. He is now encouraging the people who will lose coverage to apply at the federally-run health insurance exchange.

State Exchanges

In most of the states that have tried to make the law work and established their own exchanges, enrollment is proceeding. Oregon apparently is not enrolling plan members online, but the state has used paper enrollment forms and other work-arounds, so that in the first two weeks after the launch, it reduced the number of uninsured residents by 10 percent. In the first week, Kentucky’s exchange has screened more than 142,000 for eligibility and had 22,000 applications started, of which 15,000 were completed. The Rhode Island exchange has created 5,700 accounts, and about 800 people have completed applications. Implementation may be easier for states with smaller populations and geographic area. Still, most of the states running their own exchanges have been able to address problems more quickly than the federal government has done.